How to start a recruitment company or agency? A step-by-step guide

A recruitment company or agency is an exciting business prospect with a lot of potential. That’s probably why you’re thinking of setting one up.

Is it difficult? It can be. But if you follow these steps, it’ll make starting a recruitment agency a whole lot easier.

Consider a niche

A general recruitment business can work well, but in such a competitive industry, many start-ups find more success by focusing on a niche sector. The available market audience will be smaller, but many companies prefer to work with a recruitment agency with specialist industry experience, so it can be easier to get your foot in the door.

If you do go down this route, just remember to fully research potential niches, as market demand in some sectors is much stronger than others.

Familiarise yourself with the laws and regulations

When setting up a recruitment agency, there are a lot of regulations to follow in terms of what you can and can’t do.

If you have experience in the recruitment industry, you may know these already, but it’s well worth familiarising yourself with the most up-to-date regs. Some industry sectors also require a license.

Work out the finances for your recruitment agency

While a lot of success can be achieved in the recruitment industry, it’s notorious for tricky cash flow conditions.

One of the main reasons is down to the delay between payments. The period of time between the recruitment work being done, and the payment being received, can be up to three months in many cases.

Banks can also be hesitant to provide affordable finance – particularly if your agency is growing quickly.

That’s why it’s crucial to do the maths when it comes to your day-to-day operations. Consider the worst case scenarios, and then assess whether the funds available would help you get through those quieter periods.

Fortunately, there are very effective tools to help manage cash flow which we’ll discuss later in the article.

Get the marketing right, particularly during the start-up phase

Marketing is key. Not just the brand name and website, but also your market positioning.

What is your target audience looking for in an agency? How will you reach out to them? What will you offer that differs you from your competitors? How will you compete in terms of pricing?

A good marketing plan, executed well, plays a big role in building those initial clients. From there, you can collect a portfolio of previous work and use your reputation to expand your client base.

Consider REC membership

The Recruitment & Employment Confederation, also known as REC, is an accreditation body for the UK’s recruitment industry. It’s not essential to join, but if you do, it can give your agency more credibility in front of potential clients.

Plus, if you’re just starting out in the recruitment industry, or feel like sharpening your skills before you launch your own agency, REC offers a range of training courses for all levels.

Make sure factoring is available to you

Factoring is a service where you can sell your receivable invoices to a third party (the “factor”) at a discount, so you get paid sooner, while the third party is repaid when the invoice becomes due and is eventually settled.

That’s the trade-off: you make a little less, but get the money when you need it. You can turn an invoice due in 3 months into cash in the bank within just a few days.

Why is this so important? Because cash flow can be particularly difficult for recruitment agencies with such long delays between work and payment. It’s therefore no surprise that recruitment is one of the busiest sectors in the factoring industry.

And with most recruitment agencies having a large percentage of their assets held in outstanding invoices, it’s often the only way to free up cash quickly to smooth out any bumps in the road.
That’s why it’s vital for any recruitment company to have access to competitive factoring. Perhaps you’ll never even use it. But if you do find yourself in a situation where you have upcoming bills, and all your income is tied up in unpaid invoices, factoring can be a relatively affordable way to avoid any problems.

As a factoring broker specialising in the recruitment agency, we’ve formed relationships with factoring firms to source you the best deal we can find. Tell us what you need, and you’ll have factoring from a reputable company with fast payment and very competitive terms. It’s as simple as that.

When setting up a recruitment agency, some of the fastest growth can be achieved through leveraging online marketing. For example:

Social media – A great way to build brand recognition and authority while reaching out to potential clients. LinkedIn, as a dedicated business social media platform, is one of the most effective.

E-mail marketing – A carefully selected e-mail marketing list can allow you to contact companies and ask if they have any vacancies you can find talent for. Lists can also be sourced for addresses and phone numbers if you prefer to use other forms of communication.

Job websites – Major job websites are some of the recruiter’s most important tools. If you’re given the task of filling a job vacancy, you can use the platform to promote the position and access potentially thousands of willing candidates.

Take advantage of specialist payroll and accounting facilities

For recruitment businesses, workers’ payrolls can be complicated. This is particularly the case for temps, where a lot of organisation is required to ensure that all workers are paid on time and correctly.

Fortunately, there are accounting platforms designed specifically for recruitment businesses to make managing the finances a lot easier. Better still, some factoring firms provide these facilities with factoring included in a seamless package. With this, factoring can be used to help pay workers on time so there’s a much lower risk of cash flow causing missed or incorrect payments.

Be people-focused

The most successful recruitment agencies have a passion for pairing the best people with the best jobs. It’s a two-way street. If someone receives a job they enjoy, it makes them a better employee and satisfies the company paying your fee (i.e. the employer).

With effective marketing, sound financials, accessible factoring and a passion for the trade, you’ll be able to turn your start-up recruitment agency into a long-term success.